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Exhibit 4.4
Z-TEL TECHNOLOGIES, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS
SERIES D CONVERTIBLE PREFERRED STOCK
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Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
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Z-Tel Technologies, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article FOURTH of its
Certificate of Incorporation (the "Certificate of Incorporation") and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, by authority of the Board of Directors of the
Corporation, the Pricing Committee of the Board of Directors of the
Corporation, at a Special Meeting held on June 30, 2000, adopted the following
resolution, which resolution remains in full force and effect on the date
hereof:
WHEREAS, in connection with the execution by the Corporation of the
Stock Purchase Agreement, it is deemed to be in the best interests of the
Corporation and its stockholders to create a new series of convertible
preferred stock;
NOW, THEREFORE, BE IT RESOLVED, that the Corporation hereby
establishes a new series of authorized preferred stock, having a par value of
$0.01 per share, which series shall be designated as "Series D Convertible
Preferred Stock" (the "Series D Preferred"), and which series shall consist of
five million (5,000,000) shares and shall have the powers, designations,
preferences and relative, participating, optional and other special rights,
qualifications, limitations and restrictions set forth herein.
1. CERTAIN DEFINITIONS. Unless the context otherwise requires,
in addition to the terms defined elsewhere herein, the terms defined in this
Section 1 shall have, for all purposes of this resolution, the meanings herein
specified when used herein with initial capital letters (with terms defined in
the singular having comparable meanings when used in the plural).
"Common Stock" shall mean the common stock, $.01 par value per share,
of the Corporation.
"Junior Stock" means the Common Stock and any other capital stock of
the Corporation the terms of which do not expressly provide that such capital
stock is on a parity with or senior to the Series D Preferred as to dividend
rights and rights upon liquidation.
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"Stock Purchase Agreement" means the Stock Purchase Agreement, dated
July 6, 2000, by and among the Corporation, the Holder and the other investors
named on Schedule I thereto.
2. DIVIDENDS AND DISTRIBUTIONS.
(a) Series D Dividends. The holders of record of shares
of Series D Preferred shall be entitled to receive dividends at a rate of eight
percent (8%) of the Liquidation Preference (as defined herein) per annum per
share of Series D Preferred (the "Series D Dividend"), which shall be fully
cumulative, prior and in preference to any declaration or payment of any
dividend or other distribution on any Junior Stock (and excluding any stock
splits and subdivisions for which an adjustment is made under Section
4(c)(v)(1) below). The Series D Dividend shall accrue from the date of issuance
of each share until the earlier of (i) the conversion of such share of Series D
Preferred to Common Stock, (ii) a Liquidation (as defined herein), or (iii) the
repurchase or redemption of such share of Series D Preferred. Such dividend
shall be payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year (each a "Series D Dividend Date") commencing on
September 30, 2000, except that if any such date is a Saturday, Sunday or legal
holiday (a "Non-Business Day"), then such dividend shall be payable on the next
day that is not a Saturday, Sunday or legal holiday on which banks in the State
of Delaware are permitted to be closed (a "Business Day") to holders of record
as they appear on the stock ledger of the Corporation on the applicable record
date, which shall be not more than sixty (60) nor less than ten (10) days
preceding the payment date for such dividends, as fixed by the Board of
Directors (the "Series D Record Date"). Series D Dividends shall be payable
only when, as and if declared by the Board of Directors out of funds legally
available therefor. The dividends shall either (i) accrue, (ii) be payable in
cash, or (iii) be payable in shares of Series D Preferred, as provided in the
next paragraph. The dividends shall automatically accrue in the absence of an
election by the Board of Directors within sixty (60) days after each Series D
Dividend Date to pay the dividends. The amount of dividends payable for any
period that is shorter or longer than a full annual dividend shall be computed
on the basis of a 360-day year and the actual number of days elapsed (including
the first day but excluding the last day) occurring in the period for which
such amount is payable. All accrued but unpaid dividends (whether declared or
undeclared) shall accrue interest at a rate of ten percent (10%) per annum
computed on the basis of a 360-day year and the actual number of days elapsed
(including the first day but excluding the last day) occurring in the period
for which such amount is payable, but with interest on such dividend compounded
on a quarterly basis (on each March 31, June 30, September 30 and December 31)
for the year during which such dividend was payable, and thereafter until paid.
If the Series D Dividend cannot be paid in full, dividends shall be paid, to
the maximum possible extent, to the holders of the Series D Preferred pro rata
on the basis of the amount of accrued and unpaid dividends outstanding on each
share.
(b) Cash Dividends; In-Kind Dividends. Dividends that
are declared and payable on each September 30 shall be paid in cash. Until the
fifth anniversary of the Original Issue Date (or, if such day is not a business
day, on the first business day thereafter), dividends that are declared and
payable on each March 31, June 30 and December 31 shall be paid in shares of
Series D Preferred (each, a "Series D Payment-in-Kind") rather than cash,
valuing each
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such share issued at the Liquidation Preference. Thereafter, all dividends that
are declared and payable shall be paid in cash.
(c) So long as any shares of the Series D Preferred are
outstanding, no dividend, except as described in the last sentence of Section
2(d) below and except as described in the next succeeding sentence, shall be
declared or paid or set apart for payment on any parity securities, nor shall
any parity securities be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any shares of any such stock) by the Corporation,
directly or indirectly (except by conversion into or exchange for parity
securities or Junior Stock), unless in each case all accrued and unpaid
dividends have been or contemporaneously are declared and paid or, if payable
in cash, declared and a sum sufficient for the payment thereof is set apart for
such payment on the Series D Preferred for all dividend periods terminating on
or prior to the date of payment of the dividend on, or the date of redemption,
purchase, or acquisition for consideration of, such parity securities. When all
accrued and unpaid dividends on the Series D Preferred are not paid in full or
a sum sufficient for such payment is not set apart, as aforesaid, any dividends
and additional amounts declared upon shares of the Series D Preferred and any
dividends and additional amounts declared upon any other parity securities
shall be declared ratably in proportion to the respective amounts of accrued
and unpaid dividends and additional amounts accumulated and unpaid on the
Series D Preferred and dividends and additional amounts accumulated and unpaid
on such parity securities.
(d) So long as any shares of the Series D Preferred are
outstanding, no dividends shall be declared or paid or set apart for payment
and no other distribution shall be declared or made upon Junior Stock, nor
shall any Junior Stock be redeemed, purchased or otherwise acquired (any such
dividend, distribution, redemption, purchase or acquisition being hereinafter
referred to as a "Junior Stock Distribution") for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of
any shares of any such stock) by the Corporation, directly or indirectly
(except by conversion into or exchange for Junior Stock), unless in each case
(i) all accrued and unpaid dividends and additional amounts on all outstanding
shares of the Series D Preferred shall have been paid or set apart for payment
for all past dividend periods with respect to the Series D Preferred and (ii)
sufficient funds shall have been paid or set apart for the payment of the
dividend for the current dividend period with respect to the Series D
Preferred. Notwithstanding anything in this Certificate of Designation to the
contrary, the Corporation may declare and pay dividends on parity stock which
are payable solely in additional shares of, or by the increase in the
liquidation value of, parity stock or on Junior Stock which are payable in
additional shares of, or by the increase in the liquidation value of, Junior
Stock, as applicable, or repurchase, redeem or otherwise acquire Junior Stock
in exchange for Junior Stock, and Parity Stock in exchange for Parity Stock or
Junior Stock.
3. LIQUIDATION RIGHTS. In the event of any liquidation,
dissolution or winding-up of the Corporation, whether voluntary or involuntary
(a "Liquidation"), distributions shall be made to the holders of Series D
Preferred, before any amount shall be paid to the holders of Junior Stock, in
the following manner:
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(a) Liquidation Preference; Liquidation Amount. The
Liquidation Preference of the Series D Preferred shall be $12.00 per share. The
Liquidation Preference shall not be subject to adjustment. In the event of a
Liquidation, the holders of the outstanding Series D Preferred, subject to the
other terms contained herein, shall be entitled to be paid first out of the
assets of the Corporation available for distribution to holders of its capital
stock an amount (the "Liquidation Value") equal to (i) the applicable
Liquidation Preference, plus (ii) all accrued but unpaid dividends (whether
declared or undeclared including any interest accrued thereon calculated
through the date of Liquidation), prior to any distribution to the holders of
any Junior Stock. If the proceeds from a Liquidation are not sufficient to pay
to the holders of Series D Preferred then such holders shall instead be
entitled to receive the entire assets and funds of the Corporation legally
available for distribution to the holders of capital stock, which assets and
funds shall be distributed pro rata among the holders of the Series D Preferred
on the basis of the amounts per share to be paid to each. After payment of the
full preferential amount, such holders shall not be entitled to any further
participation in any distribution of assets of the Corporation.
(b) Events Deemed a Liquidation. For purposes of this
Section 3, the holders of a majority of the outstanding shares of the Series D
Preferred may elect to have treated as a Liquidation the consolidation or merger
of the Corporation with or into any other corporation or the sale or other
transfer in a single transaction or a series of related transactions of all or
substantially all of the assets of the Corporation, or any other reorganization
or business combination of the Corporation or a Change of Control. A "Change of
Control" will be deemed to have occurred at such time as any person or persons
acting together that would constitute a "group" for purposes of Section 13(d) of
the Exchange Act shall beneficially own (within the meaning of Rule 13d-3 under
the Exchange Act, or any successor provision thereto) more than 50% of the
aggregate voting power of all classes of capital stock having the power to vote
for the election of directors or other members of the governing body of the
Corporation.
4. CONVERSION. The Series D Preferred are subject to conversion
rights as follows (the "Conversion Rights"):
(a) Conversion at Option of the Holder; Conversion at
Option of the Company. Each share of Series D Preferred shall initially be
convertible, at the option of the holder thereof, at any time on or after the
date of issuance thereof and up to and including the day immediately preceding
the Mandatory Redemption Date, into the number of fully paid and nonassessable
shares of Common Stock which results from dividing the applicable Conversion
Price (as hereinafter specified) per share in effect at the time of conversion
into the applicable per share Liquidation Preference in effect at the time of
conversion. The initial Conversion Price of the Series D Preferred shall be
$12.00 per share. The initial Conversion Price of the Series D Preferred shall
be subject to adjustment from time to time as provided in Section 4(c) hereof.
Upon conversion, all accrued or declared but unpaid dividends (including any
interest accrued thereon calculated as of the date of conversion) on the Series
D Preferred so converted shall be paid in cash or Common Stock, as applicable,
and in the case of cash, to the extent permitted by applicable law (and if not
then permitted by applicable law, at such time as the Corporation is permitted
by applicable law to pay any such dividends).
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At any time that the closing price of the Common
Stock on The Nasdaq Stock Market (or on the exchange or quotation system on
which the Corporation's Common Stock is then traded) as reported in The Wall
Street Journal (such price on a given day, referred to as the "Current Market
Price" for such day) equals or exceeds two (2) times the then-applicable
Conversion Price for twenty (20) or more consecutive trading days beginning on
or after July 13, 2002 then, beginning on the day following the 20th such
consecutive trading day and ending sixty (60) calendar days after the last such
consecutive trading day, the Corporation shall have the right to convert all,
but not less than all, of the shares of Series D Preferred into shares of
Common Stock, with each share of Series D Preferred converting into the number
of fully paid and nonassessable shares of Common Stock which results from
dividing the applicable Conversion Price per share in effect at the time of
conversion into the applicable per share Liquidation Preference in effect at
the time of conversion.
(b) Mechanics of Conversion at the Option of the Holder.
Before any holder of Series D Preferred shall be entitled to convert the same
into shares of Common Stock and to receive certificates therefor, such holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
principal office of the Corporation or of any transfer agent for the Series D
Preferred and shall give written notice to the Corporation at such office that
such holder elects to convert the same. The Corporation shall as soon as
practicable after such delivery issue and deliver at such office to such holder
of Series D Preferred a certificate or certificates for the number of shares of
Common Stock to which it, he or she shall be entitled as aforesaid and a check
payable to the holder in the amount of any accrued or declared but unpaid
dividends (including any interest accrued thereon calculated as of the date of
conversion) payable pursuant to Section 2 hereof, if any. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series D Preferred and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date. If the Corporation fails to pay all
such dividends (and interest thereon) within twenty (20) days of the date of
conversion, the holder entitled to such dividends (and interest thereon) may
elect to have the Corporation issue to such holder, in lieu of such cash
payment, additional shares of Common Stock calculated by dividing the total
amount payable on such date by the applicable Conversion Price.
(c) Adjustments to Conversion Price.
(i) Special Definitions. For purposes of this
Section 4(c), the following definitions shall apply:
(1) "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire either Common
Stock or Convertible Securities.
(2) "Convertible Securities" shall mean any
evidences of indebtedness, shares or other securities convertible into
or exchangeable for Common Stock.
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(3) "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (or, pursuant to Section
4(c)(iii), deemed to be issued) by the Corporation after the Original
Issue Date of the Series D Preferred, other than shares of Common
Stock issued or issuable:
(A) upon conversion of shares of
Series D Preferred;
(B) pursuant to any stock grant, option
plan or purchase plan, other employee stock
incentive program or agreement of the
Corporation;
(C) pursuant to convertible securities
of the Company outstanding as of the Original
Issue Date;
(D) as a dividend or distribution on
shares of Series D Preferred;
(E) in a transaction described in
Section 4(c)(v); or
(F) by way of dividend or other
distribution on shares of Common Stock excluded
from the definition of Additional Shares of
Common Stock by the foregoing clauses (A), (B),
(C), (D), (E) or this clause (F).
(4) "Original Issue Date" shall mean July
13, 2000.
(5) "Derivative Securities" shall mean
securities, other than Options and Convertible Securities, issued for
cash by the Corporation or an Affiliate of the Corporation, the value
of which is directly based upon or derived by reference to the market
value of the Common Stock. The consideration received by the
Corporation for Additional Shares of Common Stock deemed to be issued
in connection with the issuance of Derivative Securities shall be
determined by a recognized financial institution agreeable to the
Corporation and holders of at least two-thirds of the outstanding
shares of Series D Preferred.
(ii) No Adjustment of Conversion Price. No
adjustment in the applicable Conversion Price of the Series D Preferred shall
be made in respect of the issuance of Additional Shares of Common Stock unless
the consideration per share for an Additional Share of Common Stock issued or
deemed to be issued by the Corporation is less than the greater of (i) the
Current Market Price in effect on the date of such issue or (ii) the
then-existing Conversion Price.
(iii) Deemed Issue of Additional Shares of Common
Stock. In the event the Corporation at any time or from time to time after the
Original Issue Date of the Series D Preferred shall issue any Options or
Convertible Securities or Derivative Securities or shall fix a record date for
the determination of holders of any class of securities entitled to receive any
such Options or Convertible Securities or Derivative Securities, then the
maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent adjustment
of such number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and Options therefor, the exercise of
such
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Options and conversion or exchange of such Convertible Securities, or in the
case of Derivative Securities, the settlement of such Derivative Securities,
shall be deemed to be Additional Shares of Common Stock issued as of the time
of such issue or, in case such a record date shall have been fixed, as of the
close of business on such record date, provided that Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share of such Additional Shares of Common Stock (such consideration, in the
case of Derivative Securities, determined as set forth in Section 4(c)(i)(5))
would be less than the greater of the Current Market Price and the applicable
Conversion Price for the Series D Preferred in effect on the date of and
immediately prior to such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
(1) except as provided in Section
4(c)(iii)(2), no further adjustment in the Conversion Price shall be
made upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities or settlement of such
Derivative Securities;
(2) if such Options or Convertible
Securities or Derivative Securities by their terms provide, with the
passage of time or otherwise, for any change in the consideration
payable to the Corporation, or change in the number of shares of
Common Stock issuable, upon the exercise, conversion, settlement or
exchange thereof (other than under or by reason of provisions designed
to protect against dilution), the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto) and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be recomputed
to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities or settlement rights under such Derivative Securities; and
(3) no readjustment pursuant to clause (2)
above shall have the effect of increasing the Conversion Price to an
amount which exceeds the lower of (A) the Conversion Price on the
original adjustment date or (B) the Conversion Price that would have
resulted from any issuance of Additional Shares of Common Stock
between the original adjustment date and such readjustment date.
(iv) Adjustment of Conversion Price Upon Issuance
of Additional Shares of Common Stock. In the event the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 4(c)(iii)) for a consideration per
share that is less than the greater of (i) the Current Market Price in effect
on the trading day immediately prior to the date of such issue and (ii) the
then-applicable Conversion Price, then and in each such event the applicable
Conversion Price of the Series D Preferred shall be recomputed by multiplying
the applicable Conversion Price then in effect by a fraction:
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(1) the numerator of which will be the sum
of (A) the aggregate number of shares of Common Stock issued and
outstanding on the date of issuance of the Additional Shares of Common
Stock (assuming the conversion on such date of all of the outstanding
shares of Series D Preferred) plus (B) the quotient of the aggregate
consideration received by the Corporation for the issuance of such
Additional Shares of Common Stock divided by the greater of (1) the
Current Market Price in effect on the trading day immediately prior to
the date of such issue and (2) the then-applicable Conversion Price;
and
(2) the denominator of which will be the sum
of (A) the aggregate number of shares of Common Stock issued and
outstanding on the date of issuance of the Additional Shares of Common
Stock (assuming the conversion on such date of all of the outstanding
shares of Series D Preferred) plus (B) the aggregate number of such
Additional Shares of Common Stock.
(v) Other Adjustments.
(1) Subdivisions, Combinations, or
Consolidations of Common Stock. In the event that, at any time after
the Original Issue Date of the Series D Preferred, the outstanding
shares of Common Stock shall be subdivided, combined or consolidated,
by stock split, stock dividend, combination or like event, into a
greater or lesser number of shares of Common Stock, the applicable
Conversion Price of the Series D Preferred in effect immediately prior
to such subdivision, combination, consolidation or stock dividend
shall, concurrently with the effectiveness of such subdivision
combination or consolidation, be proportionately adjusted.
(2) Reclassifications. In the case, at any
time after the Original Issue Date of the Series D Preferred, of any
capital reorganization or any reclassification of the stock of the
Corporation (other than as a result of a stock dividend or
subdivision, split-up or combination of shares), or the consolidation
or merger of the Corporation with or into another person (other than a
consolidation or merger (A) in which the Corporation is the continuing
entity and which does not result in any change in the Common Stock or
(B) which is treated as a Liquidation pursuant to Section 3(b) above),
the shares of Series D Preferred shall, after such reorganization,
reclassification, consolidation or merger, be convertible into the
kind and number of shares of stock or other securities or property of
the Corporation or otherwise to which such holder would have been
entitled if immediately prior to such reorganization,
reclassification, consolidation or merger such holder had converted
his shares of Series D Preferred into Common Stock. The provisions of
this Section 4(c)(v)(2) shall similarly apply to successive
reorganizations, reclassifications, consolidations or mergers.
(3) If the Corporation shall hereafter pay a
dividend or make a distribution to all holders of the outstanding
shares of Common Stock in shares of Common Stock, the Conversion Price
in effect at the opening of business on the date following the date
fixed for the determination of shareholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such
Conversion Price by a
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fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the record date
fixed for such determination and the denominator shall be the sum of
such number of shares and the total number of shares constituting such
dividend or other distribution, such reduction to become effective
immediately after the opening of business on the day following such
record date. If any dividend or distribution of the type described in
this Section is declared but not so paid or made, the Conversion Price
shall again be adjusted to the Conversion Price which would then be in
effect if such dividend or distribution had not been declared.
(4) If the Corporation shall offer or issue
rights or warrants to all holders of its outstanding shares of Common
Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the greater of (i) the Current
Market Price on the record date fixed for the determination of
shareholders entitled to receive such rights or warrants or (ii) the
then-existing Conversion Price, the Conversion Price shall be adjusted
so that the same shall equal the price determined by multiplying the
Conversion Price in effect at the opening of business on the date
after such Common Stock record date by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at
the close of business on the record date plus the number of shares of
Common Stock which the aggregate offering price of the total number of
shares of Common Stock subject to such rights or warrants would
purchase at such Current Market Price and of which the denominator
shall be the number of shares of Common Stock outstanding at the close
of business on such record date plus the total number of additional
shares of Common Stock subject to such rights or warrants for
subscription or purchase. Such adjustment shall become effective
immediately after the opening of business on the day following the
record date fixed for determination of shareholders entitled to
purchase or receive such rights or warrants. To the extent that shares
of Common Stock are not delivered pursuant to such rights or warrants,
upon the expiration or termination of such rights or warrants the
Conversion Price shall again be adjusted to be the Conversion Price
which would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made on the basis of delivery
of only the number of shares of Common Stock actually delivered. If
such rights or warrants are not so issued, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in
effect if such date fixed for the determination of shareholders
entitled to receive such rights or warrants had not been fixed. In
determining whether any rights or warrants entitle the holders to
subscribe for or purchase shares of Common Stock at less than such
Current Market Price or Conversion Price, and in determining the
aggregate offering price of such shares of Common Stock, there shall
be taken into account (x) any consideration received for such rights
or warrants, with the value of such consideration and the amount of
such exercise or subscription price, if other than cash, to be
determined by the Board of Directors and (y) the amount of any
exercise price or subscription price required to be paid upon exercise
of such warrants or rights.
(d) Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Conversion Price of the Series D
Preferred pursuant to this Section 4, the Corporation at its expense shall
promptly thereafter compute such adjustment or readjustment in accordance with
the terms hereof and furnish to each holder of Series D Preferred a certificate
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setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation shall,
upon the written request at any time of any holder of Series D Preferred
furnish or cause to be furnished to such holder a like certificate setting
forth (i) such adjustments and readjustments, if any, (ii) the applicable
Conversion Price of the Series D Preferred at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of the Series D
Preferred
(e) Status of Converted Stock. In case any shares of
Series D Preferred shall be converted pursuant to Section 4 hereof, the shares
so converted shall be canceled, shall not be reissuable and shall cease to be a
part of the authorized capital stock of the Corporation.
(f) Fractional Shares. In lieu of any fractional shares
in the aggregate to which the holder of Series D Preferred would otherwise be
entitled upon conversion, the Corporation shall pay cash equal to such fraction
multiplied by the fair market value of one share of Common Stock.
(g) Miscellaneous.
(i) All calculations under this Section 4 shall
be made to the nearest cent or to the nearest one hundredth (1/100) of a share,
as the case may be.
(ii) The holders of a majority of the outstanding
shares of Series D Preferred shall have the right to challenge any
determination by the Board of Directors of fair market value pursuant to this
Section 4, in which case such determination of fair market value shall be made
by an independent appraiser selected jointly by the Board of Directors and the
challenging parties, the cost of such appraisal to be borne (I) by the
challenging parties, if the fair market value as determined by such appraisal
does not exceed the determination of fair market value by the Board of
Directors by more than ten percent (10%) and (II) by the Corporation, if the
fair market value as determined by such appraisal exceeds the determination of
fair market value by the Board of Directors by more than ten percent (10%).
(iii) No adjustment in the applicable Conversion
Price of the Series D Preferred will be made if such adjustment would result in
a change in such Conversion Price of less than $0.01. Any adjustment of less
than $0.01 which is not made shall be carried forward and shall be made at the
time of and together with any subsequent adjustment which, on a cumulative
basis, amounts to an adjustment of $0.01 or more in such Conversion Price.
(h) No Impairment. The Corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all action as may be necessary or appropriate in order to protect the
conversion rights of the holders of Series D Preferred against impairment.
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(i) Reservation of Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, solely for the purpose
of effecting the conversion of the shares of Series D Preferred such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of Series D Preferred. If at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series D
Preferred the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
5. VOTING RIGHTS. Except as otherwise required by law or by
Section 8 hereof, the holder of each share of Series D Preferred will be
entitled to vote on all matters with the holders of the Common Stock as a
single class, and not as a separate class or series. Each share of Series D
Preferred will entitle the holder to the number of votes per share equal to the
full number of shares of Common Stock into which such share of Series D
Preferred is convertible on the record date for such vote. The holders of
Series D Preferred shall receive notice of and shall be entitled to attend in
person or by proxy any meeting of the holders of Common Stock.
6. NOTICES OF CERTAIN RECORD DATES. In the event of any taking
by the Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Corporation shall mail to each
holder of Series D Preferred at least twenty (20) days prior to the record date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the
anticipated amount and character of such dividend, distribution or right.
7. NOTICES. Any notice required by the provisions of this
Amended or Restated Certificate to be given to the holders of Series D
Preferred shall be deemed given (i) when made, if made by hand delivery, (ii)
upon confirmation, if made by fax, or (iii) one business day after being
deposited with a reputable next-day courier, postage prepaid, and in each case,
addressed to each holder of record at such holder's address or fax number
appearing on the books of the Corporation.
8. APPROVAL OF CERTAIN TRANSACTIONS. So long as any shares of
Series D Preferred are outstanding, the Corporation shall not, without first
obtaining the written approval of the holders of seventy percent (70%) of the
outstanding shares of Series D Preferred voting as a separate class,
(i) amend this Certificate or the Certificate of
Incorporation or bylaws of the Corporation or take any other action, in each
case which adversely affects the rights, preferences or privileges of the
Series D Preferred;
(ii) increase or decrease the authorized number of
shares of Series D Preferred;
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(iii) create any new class or series of shares, or
issue any such shares or Options or Convertible Securities exercisable or
convertible into such shares, that have a preference over or are on a parity
with the Series D Preferred with respect to voting, dividends or liquidation
preferences; or
(iv) reclassify stock into shares of capital stock
of the Corporation having a preference over or parity with the Series D
Preferred with respect to voting, dividends or liquidation preferences (except
that the Corporation may grant voting rights to shares of a series of preferred
stock which have the right to vote with holders of Common Stock on an as
converted basis);
9. REDEMPTION.
(a) The Series D Preferred shall not be redeemed by the
Corporation prior to the third anniversary of the Original Issue Date. The
Corporation may at its option redeem the Series D Preferred in whole or in part
on or after the third anniversary of the Original Issue Date, at any time or
from time to time, upon at least thirty days' prior notice, at a redemption
price equal to the percentage of the Liquidation Preference per share of Series
D Preferred set forth below, plus any accumulated unpaid dividends (whether or
not declared) up to but excluding such redemption date. Shares so redeemed
shall be cancelled and upon such cancellation shall be deemed to be authorized
and unissued shares of Preferred Stock, without par value, of the Corporation
but shall not be reissued as shares of the same series.
IF REDEEMED ON OR AFTER THE AND REDEEMED BEFORE THE PERCENT OF
ANNIVERSARY OF THE ORIGINAL ANNIVERSARY OF THE ORIGINAL LIQUIDATION
ISSUE DATE OCCURING IN ISSUE DATE OCCURRING IN PREFERENCE
---------------------- ----------------------- ----------
2003 2004 105%
2004 2005 104%
2005 2006 103%
2006 2007 102%
2007 2008 101%
(b) Mandatory Redemption. To the extent permitted by
law, the Corporation shall redeem, on the eighth anniversary of the Original
Issue Date (or, if such day is not a business day, on the first business day
thereafter) (the "Mandatory Redemption Date"), all remaining shares of Series D
Preferred then outstanding, for an amount equal to the Liquidation Preference
for each share outstanding, plus an amount in cash equal to all accrued but
unpaid dividends thereon to the Mandatory Redemption Date (the "Redemption
Price"). Prior to authorizing or making such redemption with respect to the
Series D Preferred, the Corporation, by resolution of the Board of Directors
shall, to the extent of funds legally available therefor, declare a dividend on
the Series D Preferred payable on the Mandatory Redemption Date in an amount
equal to any accrued and unpaid dividends on the Series D Preferred as of such
date and, if the Corporation does not have sufficient legally available funds
to declare and pay all dividends accrued at the time of such redemption, any
remaining accrued and unpaid dividends
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shall be added to the redemption price. After paying any accrued and unpaid
dividends pursuant to the foregoing sentence, if the funds of the Corporation
legally available for redemption of shares of the Series D Preferred then
required to be redeemed are insufficient to redeem the total number of such
shares then outstanding, those funds which are legally available shall be used
to redeem the maximum possible number of shares of the Series D Preferred,
which shares to be redeemed shall be allocated pro rata among the holders of
the Series D Preferred based on the number of shares of Series D Preferred held
by such holders. At any time and from time to time thereafter, when additional
funds of the Corporation are legally available to discharge its obligation to
redeem all of the outstanding shares of Series D Preferred required to be
redeemed pursuant to this section (the "Mandatory Redemption Obligation"), such
funds shall be immediately used to discharge such Mandatory Redemption
Obligation until the balance of such shares have been redeemed. If and so long
as the Mandatory Redemption Obligation shall not be fully discharged, dividends
on any remaining outstanding shares of Series D Preferred shall continue to
accrue and be added to the dividend payable pursuant to the second preceding
sentence.
(c) Notice. The Corporation will provide notice of any
redemption of shares of Series D Preferred to holders of record of the Series D
Preferred to be redeemed not less than 30 nor more than 60 days prior to the
date fixed for such redemption. Such notice shall be provided by first-class
mail postage prepaid, to each holder of record of the Series D Preferred to be
redeemed, at such holder's address as it appears on the stock transfer books of
the Corporation. Each such mailed notice shall state, as appropriate, the
following:
(i) the redemption date;
(ii) the number of shares of Series D Preferred to
be redeemed and, if fewer than all the shares held by any holder are to be
redeemed, the number of such shares to be redeemed from such holder;
(iii) the Redemption Price;
(iv) the place or places where certificates for
such shares are to be surrendered for redemption;
(v) the amount of full cumulative dividends per
share of Series D Preferred to be redeemed accrued and unpaid up to but
excluding such redemption date, and that dividends on shares of Series D
Preferred to be redeemed will cease to accrue on such redemption date unless
the Corporation shall default in payment of the Redemption Price plus such full
cumulative dividends accrued and unpaid thereon;
(vi) the name and location of any bank or trust
company with which the Corporation will deposit redemption funds pursuant to
subsection (e) below;
(vii) the then-effective Conversion Price; and
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(viii) that the right of holders to convert shares
of Series D Preferred to be redeemed will terminate at the close of business on
the business day next preceding the date fixed for redemption (unless the
Corporation shall default in the payment of the Redemption Price and such full
cumulative dividends accrued and unpaid thereon).
Any notice that is mailed as set forth above shall be conclusively presumed to
have been duly given, whether or not the holder of shares of Series D Preferred
receives such notice, and failure to give such notice by mail, or any defect in
such notice, to the holders of any shares designated for redemption shall not
affect the validity of the proceedings for the redemption of any other shares
of Series D Preferred.
(d) Mechanics of Redemption. Upon surrender in
accordance with the aforesaid notice of the certificate for any shares so
redeemed (duly endorsed or accompanied by appropriate instruments of transfer
if so required by the Corporation), the holders of record of such shares shall
be entitled to receive the redemption price, without interest, plus full
cumulative dividends thereon accrued and unpaid up to but excluding such
redemption date out of funds legally available therefor. If fewer than all the
shares represented by any such certificate are redeemed, a new certificate
representing the unredeemed shares shall be issued without cost to the holder
thereof.
(e) Redemption Funds. On the date of any redemption
being made pursuant to this Section, the Corporation shall, and at any time
after notice of such redemption shall have been mailed and before the date of
redemption the Corporation may, deposit for the benefit of the holders of
shares of Series D Preferred to be redeemed the funds necessary for such
redemption with a bank or trust company having a capital and surplus of at
least $1 billion, with instructions to such bank or trust company to pay the
full redemption amounts as provided herein to the holders of shares of Series D
Preferred upon surrender of certificates for such shares; provided, however,
that the making of such deposit shall not release the Corporation from any of
its obligations hereunder. Any moneys so deposited by the Corporation and
unclaimed at the end of two years from the date designated for such redemption
shall revert to the general funds of the Corporation and, upon demand, such
bank or trust company shall pay over to the Corporation such unclaimed amounts
and thereupon such bank or trust company shall be relieved of all
responsibility in respect thereof and any holder of shares of Series D
Preferred so redeemed shall look only to the Corporation for the payment of the
full redemption amounts, as provided herein.
(f) Rights After Redemption. Notice of redemption having
been given as aforesaid, upon the deposit pursuant to subsection (e) of the
full redemption amounts as provided herein in respect of all shares of Series D
Preferred then to be redeemed, notwithstanding that any certificates for such
shares shall not have been surrendered in accordance with subsection (d), from
and after the date of redemption designated in the notice of redemption: (i)
the shares represented thereby shall no longer be deemed outstanding, (ii) the
rights to receive dividends thereon shall cease to accrue, and (iii) all rights
of the holders of such shares of Series D Preferred shall cease and terminate,
excepting only the right to receive the full redemption amounts as provided
herein without interest thereon. If the funds deposited are not sufficient for
redemption of the shares of the Series D Preferred that were to be redeemed,
then no certificates evidencing such shares shall be deemed surrendered and
such shares shall remain outstanding
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and the rights of holders of shares of Series D Preferred shall continue to be
those of holders of shares of the Series D Preferred.
10. HEADINGS AND SUBDIVISIONS. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
11. SEVERABILITY OF PROVISIONS. If any voting powers, preferences
and relative, participating, optional and other special rights of the Series D
Preferred and qualifications, limitations and restrictions thereof set forth in
this resolution (as such resolution may be amended from time to time) are
invalid, unlawful or incapable of being enforced by reason of any rule of law
or public policy, all other voting powers, preferences and relative,
participating, optional and other special rights of the Series D Preferred and
qualifications, limitations and restrictions thereof set forth in this
resolution (as so amended) which can be given effect without the invalid,
unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of the Series D Preferred and
qualifications, limitations and restrictions thereof shall, nevertheless,
remain in full force and effect, and no voting powers, preferences and
relative, participating, optional or other special rights of the Series D
Preferred and qualifications, limitations and restrictions thereof herein set
forth shall be deemed dependent upon any other such powers, preferences and
relative, participating, optional or other special rights of the Series D
Preferred and qualifications, limitations and restrictions thereof unless so
expressed herein.
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IN WITNESS WHEREOF, Z-TEL TECHNOLOGIES, INC. has caused this
Certificate of Designations, Preferences and Relative Rights, Qualifications,
Limitations and Restrictions to be signed this 13th day of July 2000.
Z-TEL TECHNOLOGIES, INC.
By: /s/ D. Gregory Smith
-------------------------------------
Name: D. Gregory Smith
Title: President and CEO
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